Dairy Farm Monitor Project
The Dairy Farm Monitor Project is a comprehensive financial and production analysis using 75 dairy farms spread evenly across three dairy regions - south western Victoria, Gippsland and northern Victoria.
Now in its eleventh year, the project is a joint initiative between Agriculture Victoria and Dairy Australia.
This comprehensive report is used by government and industry to inform policy and service delivery to generate economic growth. It also encourages farmers to identify areas of improvement in their own businesses by applying the whole farm analysis standards used by the Dairy Farm Monitor. The results and trends reported need to be interpreted carefully as participant farms may not be representative of the industry or region and participant farms differ every year.
In 2016-17 Victorian dairy farmers received record low milk prices in the eleven year history of the project. However good seasonal conditions and pasture growth allowed farmers to reduce purchased feed costs and offset the low milk price.
Farm profits improved in 2016-17 from 2015-16, but were still below the the long term average. State wide average whole farm earnings before interest and tax (EBIT) were $166,878, the fifth lowest in the history of the project. Sixty seven of the 75 participants (89%) achieved a positive return on assets. The state-wide return on assets was 2.5 per cent, compared to 0.6 per cent in 2015-16.
The 2015-16 season was characterised by dry seasonal conditions, high water costs, reduced pasture availability, higher feed costs and lower milk prices. Despite these challenging operating conditions more than half the farmers surveyed (45 of the 75) by the Dairy Farm Monitor Project recorded positive return on assets.
Overall, dairy farm profits declined in 2015-16. State-wide average whole farm earnings before interest and tax (EBIT) fell to $70,804, a 70 per cent decrease compared with the previous year. This was the second lowest EBIT recorded over the ten-year history of the report, while return on assets was 0.6 per cent compared with last year's 5.3 per cent.
Almost all farms (97 per cent) recorded positive results in 2014-15. Whole farm earnings before interest and tax (EBIT) was positive on average, but 34 per cent lower than last year. Return on assets decreased to 5.3 per cent from 8.5 per cent in 2013-14. The 2013-14 year was exceptional on many levels and this needs to be kept in mind when comparing this year's results.
The decrease in milk price was the main contributor in the reduction of profitability. The milk price fell 11 per cent from $6.77/kg milk solids in 2013-14 to $6.04/kg milk solids in 2014-15. The impact of lower milk price combined with challenging seasonal condition was reduced due to higher milk solids sold per hectare and per cow and slightly lower variable and overhead costs.
Annual Report 2013-14
Farm profitability showed great improvement on last year, with all participating farms recording a positive return on assets. The 2013/14 year saw favourable seasonal conditions, with above average rainfall for the state.
Milk reached an average price of $6.79/kg MS across participating farms; the second highest average level recorded in real terms in the eight-year history of the project. While grain and water costs increased on last year, farms drew healthy returns from feeding high quality concentrates and investing in home grown feeds. Following a challenging year in 2012/13, many farms were able to consolidate their businesses and attend to delayed capital purchases and repairs.
Following a good operating season, farmer expectations for the coming year are variable. Managing input costs and maximising efficiencies are the major expected challenges going into the next 12 months. However, with a strong opening milk price of $6.00/kg MS; the coming 12 months look positive for farm profitability.
In 2012/13 challenging market conditions saw milk price fall 11% to $4.90/kg MS and grain prices rise by 14% to $336/t DM while drier than average seasonal conditions contributed to lower industry profitability in 2012/13.
The combination of challenging market and seasonal conditions saw the average return on assets across Victoria fall from 5.0% in 2011/12 to 0.7% in 2012/13. The range was -11.5% to 10.2%, and 43 of the 75 participant farms had a positive return on assets.
Following on from 2010/11, a year that saw the second highest milk price on record and strong returns for farmers across all regions, 2011/12 again yielded a strong milk price, down only two percent to $5.52 per kilogram of milk solids. In Northern Victoria a return to traditional season for the first time in a decade saw farmers in that region make the highest returns since 2007/08. However seasonal conditions in the southern regions conspired to depress returns compared to the previous year.
The 2011/12 feature article identified the factors that enable participant farms to sustain long term profitability.
The 2010/11 year saw a return to form for all Victorian dairy regions. A strong opening milk price, followed by several step-ups helped push the average closing milk price to $5.64 per kilogram of milk solids. Favourable seasonal conditions further provided an improved operating environment in 2010/11 and 72 of the 74 farms surveyed recorded positive profits, with return on assets rising from 2.2% in 2009/10 to 6.2% in 2010/11.
The 2010/11 feature article looked at 'does farm size matter'.
In 2009/10 it was a slow start for the industry, with lower opening milk prices limiting income. However more than 80 per cent of the 71 farms recorded positive return on assets.
The feature article focused on the influence of calving pattern on cost of production, milk price received and overall business profitability.
The drop in demand for Australian export dairy products combined with climate variability, low water allocations and previous high farm gate prices has had a financial impact on farm businesses.
The feature article examined the effect of the milk price step downs on participant farms and the management strategies adopted by farm businesses to manage the lower income.
The results from the 2007/08 year reflected the strong world price for milk, and average return on assets across the state was 10%.
The focus of the feature article is on people, and how people are managed on dairy farms.
The results from the 2006/07 year reflected the exceptional seasonal conditions across the state. Average return on assets across the state was 0.1%.